Abbott Laboratories and Abbott Laboratories International
Company (collectively "Abbott" in the singular) has brought this
four-count diversity action challenging the refusal by its
insurer, Granite State Insurance Company ("Granite"), to
indemnify Abbott for certain insured losses:

1. Count I is a contractual claim for the amount
due on the insurance policy.

2. Count II is based on Illinois Insurance Code §
155 ("Section 155"), Ill.Rev.Stat. ch. 73, § 767,
which permits certain extraordinary costs to be taxed
against an insurer that vexatiously and unreasonably
refuses to pay: attorneys' fees plus an additional
amount not to exceed any of the three ceiling amounts
prescribed in Section 155.

3. Count III purports to be a tort claim seeking
compensatory and punitive damages for Granite's
wilful refusal to pay — a breach of its duty of
good faith and fair dealing towards insureds.

Employing the "Supreme Court-predictive" approach to the Erie
problem posed by that split of authority, this Court's colleague
Judge Marshall recently concluded Section 155 did not preempt the
Ledingham tort. Kelly v. Stratton, 552 F. Supp. 641 (N.D.Ill.
1982). However, for the reasons expounded at length in Commercial
Discount Corp. v. King, 552 F. Supp. 841, 847-52 (N.D.Ill. 1982),
this Court perceives its Erie obligations differently. In this
Court's view Erie (as amplified in Klaxon Co. v. Stentor Electric
Manufacturing Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 1021, 85
L.Ed. 1477 (1941)) demands adherence to the Illinois "internal"
choice of law rule that binds a state trial court to the
decisions of the Appellate Court in its own district when the
Appellate Courts diverge. In this case, this Court sits in the
same position as a Cook County Circuit Judge in the First
Appellate District, for the Illinois venue statute (Ill.Rev.Stat.
ch. 110, § 2-101) would have permitted Abbott to sue Granite (a
foreign corporation) in Cook County.*fn2 Consequently the position
taken by the First Appellate District in Tobolt is dispositive
here: Section 155 preempts any tort remedy for vexatious and
unreasonable refusal to pay insurance proceeds. Count III must
therefore be dismissed.

Count IV

Tobolt, 75 Ill. App.3d at 71, 30 Ill.Dec. at 834, 393 N.E.2d at
1181 also spells the demise of Count IV by refusing to find any
private right of action for violations of Section 154.6:

(d) not attempting in good faith to effectuate
prompt, fair and equitable settlement of claims
submitted in which liability has become reasonably
clear,

as showing that the legislature by it has expressly
ratified the cause of action [for the insurer's
breach of its duty to deal in good faith with its
insureds]. We disagree. That section is a definition
section. It provides no remedy. Section 155 does.

No other Illinois appellate court appears to have addressed the
issue. Under Erie principles that should settle the matter in
Granite's favor.

It is clear that it is not necessary to show a
specific legislative intent to create a private right
of action. If there is no indication that the
remedies available are only those the legislature
expressed in the Act, then where it is consistent
with the underlying purpose of the Act and
necessary to achieve the aim of the legislation, a
private right of action can be implied. . . . The
court looks to the totality of circumstances in
endeavoring to discover legislative intent.

No doubt authorizing private suits under Section 154.6 would be
"consistent with" its underlying purpose of protecting insureds.
But a private remedy is scarcely "necessary" to further that
purpose. As Tobolt indicated, insureds can resort to Section 155
to redress any injury flowing from the insurer's vexatious
refusal to pay. Section 155's ceilings on the penalty (a form of
punitive damages) assessed for vexatious conduct reflect the
Illinois General Assembly's judgment as to the necessary
insurer's incentive to refrain from such conduct. If anything,
such limitations on punitive damages militate against a finding
of legislative intent to permit private actions under Section
154.6, for those constraints would otherwise be rendered
nugatory.*fn3 Finally, Illinois Insurance Code § 154.8,
Ill.Rev.Stat. ch. 73, § 766.8, empowers the Illinois Director of
Insurance to issue cease and desist orders to any insurer who
commits any "improper claims practice" enumerated in Section
154.6.

Conclusion

Granite's motion to dismiss Counts III and IV is granted.

Appendix

Debates begin to grow tiresome even to the debaters (let alone
the audience) whenever the debaters begin to repeat themselves.[fn1a]
But so long as the ongoing efforts to eliminate (or to impose
significant curbs on) federal diversity jurisdiction do not bear
fruit, definition of the federal courts' proper role in diversity
cases remains highly important. And when so ordinarily thoughtful
a jurist as this Court's colleague Prentice Marshall can fall
victim to what this Court sees as flawed analysis in this area,
this Court may perhaps be pardoned a further brief response. This
Appendix will not deal chapter and verse with Judge Marshall's
Roberts opinion, for a few salient points (supplementing this
Court's Commercial Discount discussion) should suffice.

The nub of the policy that underlies Erie R. Co. v.
Tompkins is that for the same transaction the
accident of a suit by a non-resident litigant in a
federal court instead of in a State court a block
away should not lead to a substantially different
result.

Otherwise, the accident of diversity of citizenship
would constantly disturb equal administration of
justice in coordinate state and federal courts
sitting side by side.

If that concept of "equal administration of justice" is to have
any meaning at all, it must mean the diversity plaintiff or
defendant in the federal court system is required to be placed in
as near a position as possible to the state court plaintiff or
defendant asserting a like claim or defense.

From that perspective the most curious, and most troublesome,
aspect of Roberts lies in Judge Marshall's total failure to
discuss the Thorpe-Garcia dichotomy,*fn4 which under Erie and Klaxon
is just as binding on us as any other Illinois choice-of-law, or
other substantive law, rule. By what right may we federal judges
ignore that clear and binding directive as to which Appellate
Court decision to follow in case of conflict? Or is Judge
Marshall somehow exercising the "predictive" approach sub
silentio and deciding, despite any contrary indications from any
Illinois appellate court at any level, that the Illinois Supreme
Court would disapprove the rules enunciated in Thorpe and Garcia?

Roberts posits a few hypotheticals to buttress its result.
Those examples illustrate the possibility, in the Illinois
system, that future appellate courts may differ with the existing
appellate authority that, under Illinois internal choice-of-law
rules,*fn8 the Illinois trial courts must follow.*fn9 That possibility
of course exists (though neither Judge Marshall nor this Court is
omniscient, so that his acting on that possibility poses a
separate risk — if he is wrong in his prediction — that the
federal litigant may get a different brand of justice than the
Illinois courts would in fact deliver, not only at the trial
court level commensurate with our own but at the Illinois
Appellate
Court level as well!*fn10). But even granting the possibility of a
future difference, what Judge Marshall's approach does is to
apply to every present suitor in a diversity
conflict-of-authority situation a wholly different set of rules
than the identical suitor would get in the state system. And that
disparate treatment is given solely because — on the false
assumption that all cases go all the way to the top of the state
judicial ladder — the occasional litigant might obtain a
different result under the approach this Court follows (adhering
as it does to the Illinois rules governing precedential value).*fn11

That universalist approach, exemplified by Roberts, is the
essence of forum-shopping. It is at war with the reason Erie
overturned a century of practice under Swift v. Tyson. That is
why Judge Marshall is simply wrong in saying (Roberts, 568
F. Supp. at 539):

That is not at all a premise, but rather a conclusion — one
dictated by the force of Erie and the mandate it gives to follow
the Thorpe-Garcia rules.

Of course it is stifling for a free-spirited federal judge to
be relegated to the position of a sounding board for state law —
for the federal judiciary to be imprisoned by what we may view as
the state law's inadequacies or injustices. However neither that
subliminal level of impatience nor the kind of hypotheticals
posed by Judge Marshall provides a warrant for indulging in the
Roberts "solution."

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